Economics Multiple Choice Question – 17 December 2017

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

An increase in the price of 10% has led to a fall in sales of 20%.

The price elasticity of demand is?

Select ONE answer:

  1. -2
  2. +2
  3. -0.2
  4. -0.5
  5. +0.5

Is this price elastic or price in-elastic and why:
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This is multiple choice question is suitable for Economics KS5 classes.

The answer is 1 – The formula for calculating the price elasticity of demand is: Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price. If a small change in price is accompanied by a large change in quantity demanded, the product is said to be elastic (or responsive to price changes). Here PED = % change in QD of -20% / % change in P of 10% or -2.

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Economics Multiple Choice Question – 16 December 2017

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

If demand is income elastic then?

Select ONE answer:

  1. A change in income leads to a bigger change in quantity demanded (in percentages)
  2. A change in price leads to a bigger change in quantity demanded (in percentages)
  3. An increase in income increases the quantity demanded
  4. An increase in income decreases the quantity demanded
  5. A fall in income decreases the quantity demanded

What is the value of the income elasticity if the demand is income elastic:
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This is multiple choice question is suitable for Economics KS5 classes.

The answer is 3 – A positive income elasticity of demand is associated with normal goods; an increase in income will lead to a rise in demand. If income elasticity of demand of a commodity is less than 1, it is a necessity good. If the elasticity of demand is greater than 1, it is a luxury good or a superior good.

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Economics Multiple Choice Question – 15 December 2017

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

If the Price elasticity of demand is -0.5, then a 10% INCREASE in price will?

Select ONE answer:

  1. Increase in sales by 20%
  2. Decrease in sales by 20%
  3. Increase in sales by 5%
  4. Decrease in sales by 5%
  5. Leaves sales unchanged

How can price elasticity of demand be estimated:
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This is multiple choice question is suitable for Economics KS5 classes.

The answer is 4 – The formula for calculating the price elasticity of demand is: Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price. Therefore with PED = -0.5 then an increase in price will decrease sales -0.5 * 10% by 5%.

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Economics Multiple Choice Question – 14 December 2017

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

If the demand for a product is price elastic, this means?

Select ONE answer:

  1. A change in price has no effect on the quantity demanded
  2. A change in income has no effect on the quantity demanded
  3. An increase in price increases revenue
  4. An increase in price increases profits
  5. An increase in price decreases costs

What is the normal value of price elasticity of a product, if the demand is price inelastic:
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This is multiple choice question is suitable for Economics KS5 classes.

The answer is 3 – The formula for calculating the price elasticity of demand is: Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price. If a small change in price is accompanied by a large change in quantity demanded, the product is said to be elastic (or responsive to price changes).

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Economics Multiple Choice Question – 13 December 2017

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

Demand for a product is more likely to be price elastic if?

Select ONE answer:

  1. It is heavily branded
  2. There are few substitutes
  3. It is patented
  4. There are many similar products
  5. It is heavily differentiated

Explain with a real-life example what is meant by a price-elastic product:
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This is multiple choice question is suitable for Economics KS5 classes.

The answer is 4 – A number of factors come into play in determining whether demand is price elastic or price inelastic in a given market. Factors affecting price elasticity of demand include the number of close substitutes; the cost of switching between products; the degree of necessity or whether the good is a luxury; the proportion of a consumer’s income allocated to spending on the good; the time period allowed following a price change – demand is more price elastic, the longer that consumers have to respond to a price change; whether the good is subject to habitual consumption; peak and off-peak demand; and the breadth of definition of a good or service. With many similar products, there is no protection for the product against being switched to another competing product.

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Economics Multiple Choice Question – 12 December 2017

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

If the Income Elasticity of Demand is +2 and income rises by 10%, what will happen to sales?

Select ONE answer:

  1. Rise by 5%
  2. Decrease by 5%
  3. Rise by 20%
  4. Fall by 20%
  5. Stay the same

Explain with a real-life example what is meant by an income-elastic product:
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This is multiple choice question is suitable for Economics KS5 classes.

The answer is 3 – The formula for calculating income elasticity of demand is the percent change in quantity demanded divided by the percent change in income. So if income goes up by 10% and YED is 2 then the % Change in QD will be 10% * 2 = 20%

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Economics Multiple Choice Question – 11 November 2017

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

The price elasticity for a product is -2.5. The firm sells 2,000 units. What would you expect the new sales to be following a 10% price increase?

Select ONE answer:

  1. 1,500
  2. 2,000
  3. 2,500
  4. 2,200
  5. 1,800

Show your workings to arrive at your answer, and explain and justify your reasons?
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This is multiple choice question is suitable for Economics KS5 classes.

The answer is 1 – Normal formula is PED = % change QD / % change P. We know PED = -2.5 & % change in P is 10%. Substituting in this formula we know -2.5 = -x% / 10% where needs to be a higher % therefore this must be -25% / 10% to equal -2.5. 25% of 2,000 units sold is 500 units. 500 less units sold from a 10% increase in price means 2,000 – 500 i.e. new quantity sold will be 1,500 units.

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